When is an agency not an agency – when it’s an enforcement agency?

When is an agency not an agency – when it’s an enforcement agency? Alexander Pope is often attributed with the phrase “a little knowledge is a dangerous thing”. In fact, Pope said “a little learning is a dangerous thing” in 1709. It is an amusing irony that he was misquoted 65 years later by someone lacking knowledge of what he actually said.

The enforcement sector is a popular subject of debate with many views being shared in parliamentary debates, press articles and, of course, social media commentary. These opinions are often characterised by a high degree of prejudice and a low level of knowledge. This is an attempt to fill some knowledge gaps in the hope of more balanced discussion about public debt collection.

To begin, civil enforcement agents (still often referred to as bailiffs) are not debt collectors and are only used after public bodies, like councils, central government, Transport for London and other have been unable to collect outstanding debt themselves and have taken an individual to court. It is complex, highly specialised, and essential work that is needed to recover lost revenue for local and central government. It helps to sustain vital public services, while continuing to deliver the referrals, advice and support for people in debt.

Without enforcement it is estimated there would be a loss of up to £12 billion pound in council tax payments by those refusing to pay.

The fiscal challenges

Last year, civil enforcement recovered almost £1 billion pound owed to the public purse and identified 351,000 vulnerable people that were struggling with debts but were invisible to their councils.

Enforcement agents are not the architects of public debt or the reason for the increased use of enforcement action. The reason that councils have turned to the enforcement process is primarily economic. Years of austerity and under investment has impacted on local authority finances, with £6 billion pound of uncollected historic debt. At the same time, welfare reform such as universal credit and the decentralisation of council tax benefit schemes means people who have never paid council tax are being billed. The impact of the pandemic and consequent cost of living crisis has exacerbated the financial pressure for many people. However, many people choose to pay other debts over priority debt, even when they have the means.

With rising costs, stagnant wages and benefits cuts, central and local government face challenges balancing their budgets and calling in long-standing arrears. The age-old dilemma is how to ensure fairness to taxpayers with robust effective debt recovery, while maintaining vital public services, such as adult care and children’s services, road repairs and refuse collection, police and fire services.

However, by recognising that vulnerability does not necessarily mean an inability to pay, it is possible to square this circle using responsible modern enforcement practices.

Enforcement agents are often compared to private sector debt collectors. As an example, the recent report from the Credit Services Association, Keeping Pace: Where next for public sector collection practices?, revealed a low level of understanding of civil enforcement and some misdirected comparisons with debt collection agencies.

Leading the way

Debt collection agencies are often held up as a model of responsible debt resolution and many of the good practices of the sector are integral to modern enforcement. However, there are some elements in which enforcement agencies are leading the way in the world of debt recovery and resolution.

Unlike debt collection agencies, enforcement firms receive very little information about the individual’s that owe debt. In most cases the courts provide a name and address, the type of debt and the amount owed. The information is often out of date and the rest of the detail need to be extracted by enforcement firms from various data sources.

Compare this with debt collection agencies that are handed a huge amount of up to date personal details from creditors before they start collection, such as date of birth, bank details, credit reference agency information, financial and payment history. Without such an advantage, in enforcement cases the first step is to identify and verify that the creditor information is correct and, if necessary, trace a new address for the person who owes the debt. There is no guarantee that this will be successful, so it is a cost without a guaranteed return.

The first stage of the enforcement process is the Compliance stage that was introduced ten years ago in an effort to get earlier engagement. It has been transformed by firms seeking to engage debtors, identify vulnerability, assess income and expenditure, maximise income and benefits, profile for propensity to pay, run benefits calculators and ensure repayments are sustained. Enforcement firms are required to invest heavily in identifying, analysing and communicating with people who fall into the “hard to collect” category. They are leading the way in innovative technologies.

The Compliance Stage, which can run for up to 28 days before a visit, accounts for around 40% of debt collected. This stage involves data cleansing, matching and linking multiple cases, DVLA checks and other financial profiling.

The customer journey has been highly digitised with a choice of communications channel based on accessibility at all times of the day - both self-service and assisted. Debtors that cancel a call are prioritised for SMS webform and trackable email. Live webchat is available for people who find face-to-face or over the phone conversations difficult. Bespoke, tailored SMS webforms and chatbot AI technology, incorporating nudge theory techniques, are all used to encourage engagement and debt resolution.

In response to local authority client requirements and a highly competitive market, an additional stage has evolved that comes before the Compliance stage. Pre-enforcement action is the equivalent to the pre-action protocol that is standard in financial services.

This stage can involve a call or visit from enforcement agent to ascertain a someone’s circumstances without any formal taking control of goods action. There may be letters and an outbound communication leading to interventions for vulnerability, such as welfare support offered by council services, debt advice and suspension of debt recovery.

No fee is collected for this stage and there is no additional input from local authorities, but a significant investment in technology has been made by enforcement firms.

Council tax debt collection

Criticism of enforcement agents is often directed at the collection of council tax; more so than the other types of debt recovered by enforcement agents. This is often based on a vain attempt to draw comparisons with debt types that are subject to FCA oversight.

Council tax arrears is distinct from other debts because council tax is required to be paid by anyone within the council’s jurisdiction. Unlike financial services and credit providers or utilities, there is no option for councils to select their customers. Equally, residents cannot switch council and carry over their debt, like they can with utilities and banks.

The price that residents pay is means tested by valuation and not at the billing stage. Unlike consumer credit provision, which can be stopped and started, council tax is a recurring debt meaning that the next bill will arrive in a year’s time, regardless of whether the year before is paid up.

Enforcement firms are paid according to a fixed fee structure set by the Ministry of Justice. The Compliance stage is currently charged at £75, and firms can add a fixed fee of £235 if a visit is required and the debt is paid. No fee is recovered for unpaid debts.

The fee that enforcement agents can apply has not been reviewed for over 10 years. How many other sectors – private or public – have been unable to adjust their charges for over a decade? There is no cost to the taxpayer for enforcement services.

Enforcement agents cannot charge interest on debt, which reduces the risk that individuals end up in a spiral of debt. However, they can, in certain circumstances, arrange with the local authority for repayment to take place over a longer period if it reduces genuine hardship and increases the likelihood the debt will be repaid in full. This balance provides fairness to taxpayers and vital funding for councils while strengthening valuable protections for the vulnerable.

The fact that a fee is not guaranteed leads some people to believe that enforcement agents are driven to poor practice by debt collection targets. Local councils do not pay a commission to enforcement agents in the same way that debt collection agencies charge fees and commission.

And while the collection rate is important to councils, there are other performance measures in SLAs. For example, customer experience and satisfaction, low complaint levels and support for vulnerable people and cases collected without a visit.

A key difference with DCAs is that enforcement agents are certificated by a judge and empowered to visit premises and gain peaceful entry. Debt collectors have no such authority. Enforcement agents are required to renew their certificates in court every two years. Debt collectors have no certification.

Enforcement visits are closely controlled and monitored for compliance. Enforcement agents usually wear body-worn cameras to record enforcement visits on film. Video footage is constantly reviewed to monitor agents’ conduct and performance. Agents’ vehicles are often tracked by satellite and their phone use can be monitored and call centre calls are recorded. This degree of monitoring means that standards are maintained and complaint levels are very low. In recent independent analysis of 650 enforcement visits, the Enforcement Conduct Board found 94% of visits complied with all of the National Standards.

Welfare support and expertise

Identifying and supporting vulnerable people is embedded into every part of the enforcement business, from contact centre operators to enforcement agents in the field.

In line with private sector agencies, all CIVEA members have a dedicated welfare team or officer to deal with the most vulnerable cases – we refer vulnerable people to independent debt advice services and all employees receive training from debt advice services on how to identify and assist vulnerable people.

Enforcement agents are often the first to identify people in vulnerable situations, particularly during enforcement visits. If agents encounter vulnerable people, enforcement action is suspended, and they will refer that person for additional support to welfare teams and council support services.

Enforcement agents undertake extensive training on all levels of vulnerability to help people engage with the debt enforcement process. Not all vulnerability prevents an individual from repaying their debts.

Vulnerability may be short-term or long-term. For a short-term vulnerability, a payment holiday may be sufficient to support a customer, whereas a long-term vulnerability may require a long-term payment arrangement - or for a case to be returned to a client.

Agents adopt a flexible and tailored approach to address the transient and subjective nature of some customers’ circumstances, and when dealing with those customers that are in arrears with several different creditors, they may request evidence of vulnerability. Without this, they would not be able to meet obligations to council clients, to the court or to the taxpayer whose money is ultimately recovered.

Enforcement agents are tasked with making sure those who are vulnerable are given the appropriate protection and that payment comes from those who wilfully refuse to pay, rather than those who want to pay but cannot afford to.

Enforcement firms have joined many other sectors in adopting the use of Open Banking. Open Banking presents valuable opportunities to assess income and expenditure and give people in debt access to budgeting support. The ability to engage online is vital with an increasing number of customers preferring to engage that way. The flexibility it offers is particularly valuable, as affordability, like vulnerability, is dynamic. Static income and expenditure assessments can miss the opportunity to help people resolve their debts more quickly.

An essential public service

The significant shortfalls in local and central government budgets means that the government’s debt collection strategy is critical for its growth agenda. The failure to implement an effective fees structure for enforcement firms presents a risk for future investment and the government will need to give this serious consideration if the industry is to continue to innovate and lead the evolution of public debt recovery. A properly functioning market ensures standards are kept high and the government can meet its revenue targets.

I hope this explanation of modern enforcement practice is both educational and enlightening. We strive for openness and transparency, which is challenging in a sector that operates with a high level of discretion in support of people in difficult circumstances. If you are from a different sector and would like to learn more about the complexities of the enforcement process, I would be pleased to talk.